Revealed: Public sector is a slower payer of invoices than some of the country's biggest businesses

The public sector has emerged in new research as a slower payer of invoices than some of the country’s biggest businesses.

It paid suppliers late 61.7 per cent of the time, a worse record than FTSE 350 companies at 60.9 per cent, banks at 44.7 per cent and tech companies at 50.5 per cent, according to the study, seen exclusively by The Mail on Sunday.

The data, from a report into late payment by invoice funding firm MarketInvoice, which is due to be released next month, has been revealed as Small Business Minister Anna Soubry has admitted the Government is failing to lead by example. Meanwhile, the Federation of Small Businesses has warned that Britain’s culture of late payment is getting worse.

Blunt: Small firms Minister Anna Soubry

Supermarkets are the worst offenders, with 68.7 per cent of invoices paid late. On Tuesday, the Groceries Code Adjudicator published a report criticising Tesco for delaying payments to suppliers, saying it was in breach of the Groceries Supply Code of Practice.

The report found evidence that Tesco prioritised its own finances over fair dealings with suppliers. But the watchdog was unable to impose a fine on Tesco because it was only recently given powers to apply penalties, and they could only relate to conduct after April 6, 2015.

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In a Parliamentary debate on late payments on Wednesday, Soubry said: ‘I am going to say something slightly controversial and be very blunt... it says on my brief, “Government is leading by example by paying its suppliers fairly and promptly”. I wonder whether we really are.

‘Shall we be truly honest about this? I have examples of local authorities that are not doing that. I have an example that was brought to me – I will not go into the detail of it now, but I will be taking it up in a serious way.’

The data from MarketInvoice has revealed that late payment by the public sector appears to have risen significantly in the past year.

In 2014, 44.7 per cent of all public sector invoices were paid late. In 2015 this jumped to 61.7 per cent, meaning nearly two-thirds of invoices owed by public sector bodies were paid late. And 31 per cent of invoices owed by public sector bodies were paid more than two weeks late.

MarketInvoice, which has tracked more than 20,000 invoices over five years, said anyone owed money by a public sector body would on average be paid 6.3 days late.

Again, this compares badly with FTSE 350 firms at four days, banks at 0.3 days, and tech companies at 1.7 days.

Educational institutions have a particularly poor record – eight out of ten payments by schools, colleges and academies were paid late last year.

Anil Stocker, co-founder and chief executive of MarketInvoice, said: ‘These figures are disappointing. Public sector bodies should be setting an example for the private sector to follow, not lagging behind.’

The Cabinet Office said the Government has ‘a commitment to pay 80 per cent of undisputed and valid invoices within five days, the remainder paid in 30 days’.

Mike Cherry, policy director for the Federation of Small Businesses, said of the ‘damning’ GCA report into Tesco’s past treatment of its small suppliers: ‘It still leaves many unanswered questions about many other large businesses whose payment or behavioural culture needs to change.

‘The Government has clearly pinned its hope in who they choose as the new Small Business Commissioner. We’re unclear at the moment when that is to come into being.’

He added: ‘Before Christmas I thought it was possibly getting a little better. But now with Debenhams and Holland & Barrett issues, I honestly can’t say that.’

Holland & Barrett has been criticised this month for implementing a freeze on supplier cost increases

In November, the FSB attacked Debenhams for seeking a 1 to 2 per cent cut in supplier prices before Christmas in exchange for making payments 30 to 60 days earlier.

Health supplements chain Holland & Barrett has been criticised this month for implementing a freeze on supplier cost increases and demanding a contribution towards a £3million CCTV system and security tagging.

Cherry also called for the Prompt Payment Code, a voluntary code administered by the Chartered Institute of Credit Management, to be more rigidly enforced.

He said: ‘It’s no good having it and then people abuse it, because we’ve seen that with one or two names on that code.’

This month a website, pactscheme.com, has been launched by Chris Hawthorn, whose property marketing business failed because of late payments. The site aims to help small firms fight the problem.

Companies can upload unpaid invoices to the site and, if they remain unpaid, information on who owes money will be shared with credit reference agencies and ultimately will be exposed on its bad debtor register, defaulter.com.

Hawthorn said: ‘It’s unforgivable that British businesses on average are owed £31,901.

‘I believe with these consequences in place, it won’t be long before late payment becomes a thing of the past.’

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Public sector is a slower payer of invoices than some of the country's biggest businesses, reveals research